A Response to Harry Siegel

Image via the Observer
Image via the Observer

Last week I wrote a post about Uber and American government. I wanted to leave it at that: one quick post inspired by economists like Hoover’s Russ Roberts and Mercatus’ Adam Thierer. I work in advertising, am not a public policy and/or transportation expert, and have no vested interest in Uber save as a happy customer.

But then my good friend Ryan passed along this op-ed by Harry Siegel of the New York Daily News. Siegel, I think, tries to tell a balanced story of Uber’s recent policy victory. I don’t know Harry and assume his intentions were nothing but pure, so this is not meant as a personal attack. But his piece has a number of potentially misleading points that should be addressed. I recognize that in some instances he’s simply passing along de Blasio’s thoughts, but even then, he fails to appropriately challenge some economic nonsense.

In honor of the legendary, late baseball blog Fire Joe Morgan, I’ll include select quotes from Siegel’s original piece in bold, followed by my commentary.

This week Mayor Bill de Blasio tried to make an example of Uber to demonstrate that billion-dollar corporations can’t dictate terms of business to New York.

This is one of many truly confounding sentences in Siegel’s article. Why is it the job of an elected official to “make an example” out of any firm? The answer: it is not. If Uber violates a law, de Blasio can, in his capacity as an executive, enforce it. But, in theory at least, individuals and corporations are supposed to receive equal treatment under the law. Because a company is high-profile and has some chutzpah doesn’t mean de Blasio can or should expend disproportionate effort to punish them. That is not republican governance, it’s thuggery.

Is it really that offensive that Uber wants to operate freely within the confines of contracts that its customers agree to? Also: referring to Uber’s immense market cap in the pejorative is completely uncalled for. It’s demonizing a company for being wildly successful in its endeavor to provide services for happy, paying customers.

Airbnb, for instance, has fought fiercely with New York officials to keep its “hosts” hidden, even when it has appeared that some of its biggest ones were major landlords turning stockpiled apartments into illegal hotels.

So Airbnb has potentially facilitated (or perhaps not adequately prevented) illegal transactions. Are these transactions wrong because they’re illegal? Almost certainly not. New York City severely restricts the ability of property owners to freely sell and re-purpose their investments; this is blatantly unconstitutional. A hotel is only illegal if it isn’t classified as a hotel by the city.

But! People are freely paying landlords, and in return, being granted temporary lodging. So in practice these are hotels, but because their owners haven’t gone through the absurd amount of red tape required by the city, they’re illegal hotels.

I admit to being a big dogmatic here, but just because something is illegal does not make it wrong, especially when laws are set by self-serving politicians (redundant term?) like Bill de Blasio.

Lyft’s implicit argument was that it was just an app and wasn’t responsible for how people used it, which New York’s attorney general called “a disingenuous attempt to disguise old-fashioned lawbreaking.”

I say this is a disingenuous attempt by a smart, well-trained legal mind to disguise old-fashioned protectionism. You can use a whole host of things to do really bad stuff, and the makers of that stuff are not legally liable. This is true when a product can easily be used by any layperson to commit a crime; Chrysler isn’t liable for its cars’ drivers running people over intentionally. It’s also true even when a product was explicitly designed for an activity that-save a few edge cases (e.g. law enforcement)-is illegal; Smith and Wesson isn’t liable for homicides committed with its guns.

So it’s no wonder that progressives across the country are trying to push back. So far, though, they’re struggling.

In the case of Uber and Airbnb, sure. And I think Siegel’s claim is indeed meant to be limited to companies in the scope of this article, i.e. “sharing economy” firms. But if the libertarians are winning this battle, they’re getting absolutely crushed in the war. Roughly 30 percent of Americans require a license to work, and thousands of new regulations are added to the federal registry every year.

The company’s explosive growth has effectively busted the city-administered yellow cab system that, for all its flaws, lets the city track cab rides, ensure vehicles are wheelchair accessible and collect 50 cents from each fare for mass transportation. Uber does none of those things.

Uber also tracks all of its rides; that’s how it determines prices and points drivers to underserved areas. If there is a demand for more cars with wheelchair accessibility, Uber can quickly react based on demand rather than build it into every single car and thus increase its overhead, which is of course passed to end users. Finally, if de Blasio had simply asked Uber to pay a 50 cent per-ride tax and left it at that, this scuffle would have been over before it even started.

Uber says drivers love being able to work when they want to. But that scenario also lets the company avoid the costly requirements of labor laws — like overtime, minimum wage, breaks, sick days as well as workers compensation, unemployment insurance and Social Security payments — even as it controls drivers’ every interaction with customers and can fire them at will.

Here Siegel fails to realize that what he views as a fundamental flaw is recognized by Uber drivers as a beneficial trade-off. Worker benefits have a cost even to the workers who receive them. A company can give you any of these things-overtime pay, breaks, etc.-but there is always a cost. In the case of yellow cab drivers, it’s a burdensome registration process and exorbitant licensing fees. Getting an NYC-sanctioned cab is extremely difficult, and backs its drivers into a corner: if the cab gig doesn’t work out to their liking, they’ve invested too much time and money to switch jobs without taking a huge hit.

And you know who else can be fired at will? The vast majority of the American workforce. I love my job, but Yahoo can cut me the second they want to. And I’m OK with that! Because if another firm comes to me with a seven-figure salary offer and the promise of luring Aaron Rodgers to the Browns (both very likely scenarios), I’m out.

“I don’t debate with private corporations,” the mayor said Monday, holding his ground and explaining that new technologies meant that “the rights of consumers are now in doubt, the rights of workers are in doubt.

By saying he won’t engage with private corporations, de Blasio is doing one, or both, of the following: he’s thinks there are massive differences between corporations and freely-associating groups of individuals, or he thinks that, once elected, he doesn’t have to listen to his electorate. The former is misguided; the latter is dangerous and ignores centuries of political evolution.

There’s all sorts of unintended consequences here. And government regulation hasn’t caught up with the reality. So I think it’s important that we do so.”

de Blasio speaks of unintended consequences of private action and then proposes government action as a fix for it. The problem? When private corporations create unintended consequences they can, compared to government actions, be far more quickly and fully reversed. Corporations are controlled by experts fully invested in their field; government regulations are created-at least initially-by jack-of-all-trades lawmakers whose primary incentive (re-election) isn’t necessarily tied to policy success. Even regulators tied to a specific policy arena (e.g. EPA) are at a massive informational and procedural disadvantage compared to their private-sector counterparts. (See my earlier post which builds largely on the work of the Independent Institute’s Bob Higgs.)

De Blasio wanted to be the national progressive model for how government can stand up to these companies on behalf of workers. Instead, his political scalp is being waved as a warning to other mayors, and to Clinton, to tread softly.

Siegel ends with a bang, and there’s a lot to unpack here.

The idea that government has to stand up to a private firm is inherently ridiculous. Government-by any definition-involves a monopoly over the legitimate use of coercion and force within a defined territory. Said another way: government has the guns, and if you don’t do what they tell you to, you’ll wind up on the wrong end of one.

Assuming workers have additional options for employment, they require no protector. No worker, myself included, has the right to a cushy job with non-negotiatble, lifelong benefits and absolute security. If de Blasio sees himself as the guarantor of this concept then he is advocating for a policy that will cripple the economy, technological process, and ultimately our standard of living.

We’re also apparently at the point in our country where a private firm barely surviving a protracted battle with a municipal politician over the ability to freely run its business constitutes a “scalp waving”. Uber didn’t threaten New York; New York threatened Uber. And this much-celebrated “victory” is really just a brief reprieve: Uber, in exchange for concessions, gets four months to go mostly go about its business. At the end of that period, the city will re-evaluate.

In sum: Uber will once again have to ask de Blasio for permission to give customers what they’re seeking en masse, and this apparently represents a triumph of unabashed anarcho-capitalism over the national interest.

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